Debate over tax increases effects on small businesses sounds familiar

As the debate over the expiring Bush-era tax cuts heats up, there are echoes from the past as Democrats and Republicans dig in on whether to raise taxes on the nation's wealthiest Americans.

In a blog post Monday, the Tax Policy Center looked back to 1993 when a similar debate over deficit reduction proposals emerged during the early years of the Clinton administration.

President Obama, like Clinton did 17 years ago, is suggesting raising taxes on those who make the most, the top 2 percent of earners. 

Republicans are providing a nearly identical answer to that call, a tax increase on the nation's wealthiest would affect small businesses, kill jobs and bring the economic recovery to a halt. 

The TPC post cites a June 24, 1993, Washington Post story by David Hilzenrath headlined, "Income Tax Hike Stirs a Debate on Jobs Impact; Administration Rejects Claims Small Business Would Be Hurt." 

He reported, "As the Senate began considering President Clinton's deficit-reduction plan yesterday, Republicans charged that the income tax increase he says is aimed at the rich would hit small businesses and jeopardize their growth."

Hilzenrath went on to cite then Senate Minority leader Robert Dole (R-Kan.), who claimed that "half the tax increase because of the rate increases is going to be paid by small business and they’re not rich."  

Recently, Sen. Orrin Hatch (R-Utah) said allowing the top income tax rates to increase would be a "job-killing tax hike."   

In 1993, Democrats had an answer that sounds similar to what's being said now: Republicans don't want to tax the rich. 

Speaker Nancy Pelosi (D-Calif.) said in a statement today that instead of helping teachers and first-responders, Republicans are focusing on an extension of the Bush tax cuts "for the wealthiest few and saddling Americans with nearly $700 billion in debt over a paid-for bill that creates 310,000 jobs for hard-working Americans."

The argument is nearly identical to what Clinton faced 17 years ago, as lawmakers ramp up their election-year rhetoric. 

Of the 36 million taxpayers who will report business income it is estimated that 900,000, or 2.5 percent, would pay higher rates if the Bush tax cuts were allowed to expire for the top brackets, according to TPC.

"However, that relative handful of business owners will report $400 billion, or almost 44 percent of all the business income included in individual returns," a TPC report said. 

Under Clinton, Congress went on to pass the budget proposals and the following year, Republicans won control of Congress for the first time in 40 years. 

Yet, regardless of the dire warnings, the economy grew substantially throughout the 1990s, creating more than 20 million new jobs. When Clinton left office he handed the next president, George W. Bush the first balanced budget since 1969.